7 Best & Worst Retirement Plans in Pro Sports

Elite athletes, from the time their special abilities become apparent, are lionized. As they move from high school to college, the benefits grow.

And if they hit it big in the professional ranks, the money can be almost too much to comprehend. A sense of entitlement can set in for some. Sometimes (like Denny McLain or Mike Tyson) the money is frittered away on material goods, bad investments or even on creating charitable foundations that don’t work out as they were intended. From the WNBA to the NFL, players often have trouble dealing with riches.

Then there are the average athletes. Sure, they make a lot more money than their peers at the same age, but their careers end all too soon and the money is turned off.

(Check out 8 of the Worst Financial Meltdowns by Athletes on ThinkAdvisor.)

And after their athletic careers are over, there are years to wait before retirement benefits kick in. That got ThinkAdvisor to wondering just what sort of retirement plans are in place for the various U.S. professional sports leagues.

We found great variation in the benefits paid as well how quickly a former athlete can qualify. Check out 7 Best & Worst Retirement Plans in Pro Sports, listed from the least benefits to the most:

7. PGA Tour

Plan Type: Incentive based

Professional golf is an individual sport and that doesn’t change when it comes to a retirement plan. Money is deposited in retirement accounts based on how well golfers do in tournaments. For those who play fewer than 15 events a year, money can be withdrawn beginning at age 50. Those who play 15 or more events on the Champions Tour must wait until they are 60.

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6. Major League Soccer

Plan Type: 401(k)

The plan, which is voluntary on the part of athletes, includes player contributions up to the IRS limit of $17,000 per year. Team contributions are capped by law at $50,000 per year and equal 3.5%. Salaries range from about $35,000 to more than $4 million.

5. WNBA

Plan Type: 401(k)

The league, established 15 years ago, offers a defined contribution retirement plan. Players are allowed to defer the maximum amount of salary allowed by the IRS. In addition, employers contribute up to 25% of the amount of employee deferrals. Other team contributions include: 2% of base salary for a player with two years of experience; 3% for those with three years; and 4% for those with four years or more. Minimum salaries rise from $37,950 for players in the league two years to a maximum of $107,000.

4. NHL

Plan Type: Pension

Skating in one game earns a player enrollment in the hockey league’s retirement plan, which switched from pension to defined contribution in 1986. Full retirement benefits can be drawn at age 45, and eligibility for reduced payments starts at 10 years earlier. Taking the ice in fewer than 400 games earns $7,760 in contributions per year. Playing more than 400 games earns $11,640 in team contributions.

3. NFL

Plan Type: Pension, 401(k), Annuity

Players are vested after three seasons in the NFL. Pension benefits are calculated using credits earned for each season played. If a player has five years of service time, his annual pension at age 55 would be $28,200. The 401(k) plan boasts a team match that is twice the player contributions once they have two years of credited time. The maximum team contribution will rise from $24,000 to $28,000 over the next seven years. Players who last four seasons or more are also eligible for an annuity.

1. (tie) NBA

Plan Type: Pension, 401(k)

The NBA has enjoyed three decades as one of the nation’s three most popular sports leagues. TV money has flowed and retirement benefits reflect that. Earning full vesting rights after three years of service in the league, players can begin drawing their pension at age 50. The annual benefit, for someone with the minimum service times, would be $19,160. With a decade of playing time, the payment rises to $60,000. But patience has its rewards. At age 62, those with three years in the league would get $60,000 and those with 10 years, $200,000. Players are also eligible to participate in a 401(k) plan, in which team contributions can be greater than player deferrals.

1. (tie) Major League Baseball

Plan Type: Pension

Players are fully vested after 10 seasons and at age 62 would receive annual payments of $200,000. Players with less playing time are entitled to smaller payments. Under the current collective bargaining agreement, owners make an annual contribution of $184.5 million to the pension fund.

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When, Why And How To File A Complaint With The CFPB

In July 2011, the Consumer Financial Protection Bureau (CFPB), a federal government agency, began collecting consumer complaints about credit cards. Since then, it has expanded to collecting complaints about mortgages, bank accounts, student loans, consumer loans, credit reporting, money transfers and debt collection. If you have a complaint about one of these financial services, here's how to determine whether it's worth submitting to the CFPB and, if so, how to do it.

Is Your Complaint Worth Submitting to the CFPB?

"Complaints to the CFPB should be for illegal acts directly affecting the consumer, systematic abuses, or an unclear complaint process or complaints not rectified within a reasonable time," says Braden Perry, a partner in the Kansas City-based law firm of Kennyhertz Perry, LLC, who has over 10 years of experience in financial services compliance, internal investigations, enforcement matters, and regulatory issues. "The CFPB should focus on these issues, and not address every consumer complaint lodged against a financial institution," he says. "It's an inefficient [process], as most complaints can be alleviated by the financial institution easily if taken seriously early on."

If you're having problems with a financial institution, your first step should be to contact the institution directly. Start with a simple email, online chat or phone call to customer service. If you're complaining by phone, you may find it helpful to write yourself a script so you don't forget anything important you want to say.

Give the company an opportunity to address your complaint. Achieving resolution is often a matter of contacting the right person. If your first email or call doesn't accomplish anything, several additional phone calls in which you ask to speak to a manager may eventually put you in touch with someone who has the authority and competence to resolve your complaint.

If those methods fail, consider filing your complaint with the CFPB.

T! he Importance of Submitting Complaints

The CFPB states that its purpose in collecting and managing consumers' complaints about financial services is to learn more about "business practices that may pose risks to consumers." In addition, the agency states, "Complaints help with our work to supervise companies, enforce federal consumer financial laws, and write better rules and regulations."

The more complaints the CFPB receives about the same issue or the same financial institution, the more likely a large problem exists that regulation might help resolve. The complaints that consumers submit to the CFPB become part of a public database that economists and other researchers can use to identify patterns and suggest improvements in the way financial institutions interact with consumers and in the way they are regulated. And you don't need to worry about confidentiality – the database doesn't contain any personally identifiable information.

Perry says CFPB regulators should address financial institutions that have systemic issues or predatory behavior. "Without appropriate safeguards, this behavior could affect many consumers and the financial institution should be taken to task," he says.

In its first two years of operation, the CFPB's consumer complaint system has received 176,700 complaints. Almost half of these were about mortgages. Another 21% were about credit cards, while 15% concerned banking services and 8% dealt with credit reporting. Student loans and consumers loans each made up another 3% of complaints. The CFPB reports that 95% of accused companies respond to complaints.

Submitting Your Complaint

If you've determined that submitting a complaint to the CFPB is necessary, it's easy to do so. Visit http://www.consumerfinance.gov/complaint/ and choose the category that your complaint applies to: bank account or service, credit card, credit reporting, debt collection, money transfer, mortgage, student loan, or vehicle or consumer lo! an.
The exact steps for submitting your complaint depend on the service you are complaining about, but here's an example. If your complaint is related to a credit card, on page 1 you'll be asked to submit a short description of the issue and choose the category to which your complaint applies from the drop-down box. It is optional to submit details such as how much money you lost, the date of your loss and whether you have taken action to resolve the issue, such as contacting the company directly or filing a legal action. On page 2, you will write a short paragraph describing what you think would be a fair resolution to the problem. Page 3 requires you to submit your full name, mailing address and email address. Page 4 asks for the name on your account, your credit card number and the name of the company you're complaining about. It also gives you the opportunity to attach any documents that support your complaint, such as proof of payment. On page 5, you review your information, certify that it is accurate and submit your complaint.

The CFPB will forward your complaint to the company you named and try to get them to respond. If the CFPB thinks another government agency is better equipped to handle your complaint, it will forward it to that agency. Next, the company will review your complaint and communicate with you about it if necessary. It will then report back to the CFPB on what its next steps will be. The CFPB will notify you about that response and let you tell the CFPB whether you're satisfied with the response after you review it. If not, you have 30 days to dispute the company's response. Throughout the process, you'll be able to check the status of your complaint by logging on to the CFPB's website or calling its toll-free number.

You can file a complaint on behalf of yourself or someone else (say, your elderly grandfather who is having trouble with his reverse mortgage). If you're not comfortable using the website, you can also submit a complaint by email, phone, fax or mail.

CFPB Consumer Response Contact Information

Online:

consumerfinance.gov/complaint

Telephone:

Toll Free Number: (855) 411-CFPB (2372) Español: (855) 411-CFPB (2372) TTY/TDD: (855) 729-CFPB (2372) Fax Number: (855) 237-2392 Hours of Operation:

8 am-8 pm EST

Mail:

Consumer Financial Protection Bureau

PO Box 4503

Iowa City, Iowa 52244

The Bottom Line

Not all complaints need to be submitted to the CFPB. "Most complaints can be handled through the financial institution and most are rectified or clarified by the financial institution," Perry says. But when the employees you interact with at your bank, credit card company, mortgage lender or other financial institution seem incapable of or unwilling to resolve your complaint, the CFPB's process may help you get a better result.

Furlough freebies ease shutdown pain

A slew of Washington, D.C.-area businesses hit hard by the government shutdown have concocted an ultra-savvy way to generate lots of needed PR and lots of love from federal employees: freebies for the furloughed.

These business -- both inside and outside the Beltway -- are trying to lure customers and media attention by offering everything from free cups of coffee to freebie sandwiches and free oil changes.

All the bad political karma resulting from the shutdown that's temporarily left roughly 800,000 federal workers jobless is getting re-shaped into positive PR by dozens of companies desperately trying to make public relations lemonade out of the government shutdown lemon.

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"It's a good PR move," says Katharine D. Paine, CEO of Paine Publishing, a PR measurement publishing and training company. "But it could get a little less exciting if everyone in town does it."

Well, everyone's not, but dozens certainly are -- each during slightly different times of the day and with different requirements for proof of federal employment. Among the freebies:

• Free shows. The Howard Theatre is offering free passes for federal employees for three upcoming events, including a Wednesday concert with Big Boi of Outkast and others. They'll get 50% off for a Sunday show by Rufus featuring Sly Stone.

• Free sandwiches. One top celebrity chef in the D.C. area, Jose Andres, tweeted that his three area eateries (Jaleo, Zaytinya and Oyamel) would be offering affected workers free sandwiches "every day until it's over."

• Free oil changes. Koons of Silver Spring MD., a car dealership close to Washington D.C., says it is offering all furloughed government employees a free oil change, free tire rotation and free multi-point inspection during the shutdown. Koons "realizes the importance of the livelihood of the federal government workforce," the company says.

• Free burgers. Z-Burger, a! local burger chain, is offering burgers to folks with federal ID cards. "This might put us out of business," says co-founder Peter Tabibian. "But we want to show that we care more about the people than the politicians do."

• Free knitting lessons. Federal workers who suddenly find themselves with extra time on their hands might want to sign-up for free knitting lessons at the yarn shop Fibre Space in Washington's neighbor Alexandria, Va. Its "Intro to Knitting" classes (which it claims are a $75 value) are offered every workday that the government stays closed. But folks will have to pay for their own material.

• Special discounts. Soupergirl has a 10% "furlough special" discount for most government employees, but there's one twist: "Members of Congress will be charged DOUBLE!" shouts a sign outside its door. Later, the seller of fresh soups tweeted a post that, in fact, it "should be charging Congress triple!"

At least one national company has joined in. Federal employees who own Hyundais can to stop making car payments for as long as the shutdown keeps them out of work, Hyundai Motor America announced Tuesday.

The Interesting Value ETF You Don't Know

NEW YORK (TheStreet) -- This past spring First Trust restructured its Strategic Value Index Fund and renamed it the First Trust Capital Strength ETF (FTCS).

The new fund falls into the "smart beta" category I have written about recently. Such funds use custom screens to select components from broad-based indices in an effort to outperform their benchmarks. [Read: Investment Ideas From Day 1 of the NY Value Investing Congress]

FTCS starts by identifying the 500 largest U.S. stocks that have at least $5 million in daily trading volume. The ETF screens those 500 stocks to find the ones with at least $1 billion in cash or short-term investments, a ratio of market cap to long-term debt of less than 30% and a return on equity greater than 15%. From there, it scores the stocks for volatility, and the fund purchases equal amounts of the 50 stocks that have the lowest volatility.

FTCS also has rules to avoid being overly concentrated in any single sector, capping exposure at 30%. The index is reconstituted quarterly. The current sector makeup favors industrials, at 20%, followed by consumer services at 19%, health care at 17%, consumer goods at 17% and tech at 10%. The fund has no exposure to utilities or telecom. Omitting those two sectors is logical because they tend to be very debt-heavy. FTCS is oriented toward large-cap stocks, so most of the names in the fund should be familiar to you, such as MasterCard (MA), Qualcomm (QCOM) and Nike (NKE). Interestingly, defense contractors make up 8% of the fund, which could smooth out the ride for FTCS if the situation in Syria escalates into a situation that is bad for the markets in general but good for defense stocks. First Trust has said that it converted its more traditional large-cap value fund into the Capital Strength fund after realizing that many investors are concerned about how fast the market has gone up in recent years and worried that the fundamentals do not necessarily support the big rally. [Read: 5 Breakout Trades to Take Ahead of the Fed] First Trust says that companies with the attributes identified by FTCS will better weather a large downturn or a period of increased volatility because those companies have more options with their cash and less financial risk because of their low debt.

Although First Trust hasn't said as much, it's also possible that it made the conversion after deciding that the original fund's lack of assets -- $37 million -- indicated the market didn't need another basic large-cap value fund.

Although the capital strength process yields a value tilt, it is not a carbon copy of other large-cap value funds offered by competitors.

The iShares S&P 500 Value ETF (IVE), the Power Shares Dynamic Large Cap Value Portfolio (PWV) and the Vanguard Mega Cap Value ETF (MGV) all have weightings greater than 20% in the financial sector compared to just 8% for FTCS. The other funds have much less exposure to the industrial sector than FTCS. [Read: Ex-JPMorgan Traders Could Face 20 Years in Prison]

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Since FTCS started trading in its current incarnation these differences have not mattered because all four of these funds have traded in lockstep. Historically the industrial sector tends to decline more than the broad market during the bear phase of the cycle and then bounces back more than the broad market in new bull markets. Although First Trust seeks to offer a fund that is more resilient to bear market declines, the fund may not in fact do that if it still has its heaviest weighting in the industrial sector when the next large decline comes. At the time of publication, Nusbaum had no positions in securities mentioned. Follow @randomroger This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

This contributor reads: Credit Writedowns Pragmatic Capitalist Mike Shedlock Barry Ritholtz John Hussman On Twitter, this contributor follows: TheStalwart ETF Database zerohedge financial acrobat

Cisco to Acquire Sourcefire in $2.7 Billion Deal

IT company Cisco (NASDAQ: CSCO  ) has agreed to acquire cybersecurity software company Sourcefire (NASDAQ: FIRE  ) , the companies jointly announced today.

The proposed transaction calls for Cisco to pay $76 per share in cash for each Sourcefire share and assume Sourcefire's outstanding equity awards for a total price of approximately $2.7 billion. The per-share price represents a 29% premium over Sourcefire's Monday closing stock price. Sourcefire shares jumped $16.71, or 28%, to $75.79 in morning trading.

"Sourcefire aligns well with Cisco's future vision for security and supports the key pillars of our security strategy.  ... [W]e have a unique opportunity to deliver the most comprehensive approach to security in the market," said Hilton Romanski, VP Cisco corporate development, in a statement.

Sourcefire founder and CTO Martin Roesch was quoted in the press release as saying, "Cisco's acquisition of Sourcefire will help accelerate the realization of our vision for a new model of security across the extended network."

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Cisco and Sourcefire will continue to act as separate companies until the deal is closed, which is expected to happen in the second half of 2013. At that time, Sourcefire employees will join the Cisco Security Group. The Columbia, Md.-based Sourcefire has more than 650 employees deployed worldwide. Cisco is headquartered in San Jose, Calif. Sourcefire was founded in 2001 and completed its IPO in 2007.

-- Material from The Associated Press was used in this report.

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Why Caterpillar Is Ready to Crawl Back

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, heavy equipment giant Caterpillar (NYSE: CAT  ) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Caterpillar and see what CAPS investors are saying about the stock right now.

Caterpillar facts

Headquarters (founded)	Peoria, Ill. (1925)
Market Cap	$55.1 billion
Industry	Top Insurance Companies To Invest In 2014 Construction and farm machinery
Trailing-12-Month Revenue	$63.1 billion
Management	Chairman/CEO Douglas Oberhelman CFO Bradley Halverson
Return on Equity (average, past 3 years)	33.4%
Cash/Debt	$6.0 billion / $36.2 billion
Dividend Yield	2.6%
Competitors	CNH Global Deere Terex

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 94% of the 6,088 members who have rated Caterpillar believe the stock will outperform the S&P 500 going forward.

Just yesterday, one of those Fools, Googlespooch, succinctly summed up the bull case for our community:

Caterpillar simply is the best at what it does: making heavy earth-moving machinery. This fact has helped to keep Caterpillar the industry titan in a complex, cyclical business. Caterpillar's strong financial standing and opportunities in China all seem to point to the company as a safe bet. In addition, at this current price, they seem undervalued which helps reduce downside risk. They also have a nice dividend yield of 2.6% which should help to reduce short pressure. Even though they have had some earnings weakness lately, I believe that they can bounce back in the coming quarters and years.

Caterpillar is the market share leader in an industry in which size matters, and its quality products, extensive service network, and unparalleled brand strength combine to give it solid competitive advantages. Read all about Caterpillar's strengths and weaknesses in The Motley Fool's brand-new report. Just click here to access it now.

Switzerland lifts 2013 GDP forecast to 1.9%

ZURICH--Switzerland lifted its economic-growth forecast for this year slightly thanks to consumer spending and expectations the world-wide economic recovery will boost demand for its industrial goods.

"Providing the international economy continues on a gradual path of recovery there are good prospects for a strengthening economic upturn in Switzerland over the next two years," the department of economics said in a statement on Thursday.

It maintained its projection for 2014. It expects the average rate of unemployment to edge lower next year.

Gross domestic product will expand 1.9% this year, government agency Seco said. That is up slightly from a previous forecast of 1.8%. It kept its projection for growth in 2014 steady at 2.3% and expects the economy to grow 2.7% in 2015.

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The economy grew for a fifth straight quarter in the three months through September as a revival in foreign demand for machinery and industrial goods offset stagnant domestic consumption.

The unemployment rate is likely to average 3.2% this year and then edge down to 3.1% in 2014, Seco said.

The consumer price index is likely to contract by an average 0.2% this year--down from a previous projection of -0.1%. It will gain 0.2% next year compared with a previous forecast of 0.3%.

Akamai Technologies, Inc. (NASDAQ:AKAM): Mark Down These Insider Buys

The number of insider buys as measured by records as recorded by iStock dropped last week to 522 from 756 the previous week. Hopefully, the lull is because boardroom members are buying Christmas presents instead of stocks. Although, it doesn't mean there aren't plenty of buys worth monitoring.

One major 3rd party buy (an individual or institution that is not involved in operating the company), is Carl Icahn's $25.46 million purchase of 1.8 million shares of Nuance Communications Inc. (NASDAQ:NUAN). It's interesting considering the billionaire investor is also involved with Apple Inc. (NASDAQ:AAPL), which uses NUAN's voice recognition - otherwise known as SIRI.

[Related -Should You Buy HP's Stellar Rebound?]

While dot connecting could be fun, iStock focuses on insider buys from people with direct involvement in managing companies, CEOs, CFOs, board members…

Regular readers of the insiders column know that we especially like buyers with a history of "getting it right." iStock is also a fan of more than one key employee/director laying out money simultaneously, which we call cluster buys.

We get both with this week's highlighted insider buying stock, Akamai Technologies, Inc. (NASDAQ:AKAM). Akamai provides content delivery and cloud infrastructure services for accelerating and improving the delivery of content and applications over the Internet in the United States and internationally.

[Related -Pandora Media Inc (NYSE:P): Improved Mobile Monetization Should Boost Profits]

Last week, Akamai Technologies CEO, Dr. F. Thomson Leighton indirectly bought (in a trust, by a spouse, etc.) 25,000 shares at $45.28 for a total investment of $1,132,000. Leighton was joined by Director, George Conrades who purchased 20,000 at a cost-average of $44.96, totaling $899,100.

Both men have bought AKAM previously in the last two years. Leighton made four earlier acquisitions with stock heading immediately higher three of the four. Longer-term, all four were handsomely p! rofitable investments. Meanwhile, Conrades stepped into the NASDAQ 100 member three times prior to last week. The director is three-for-three.

Combines, the duo is seven-for-seven in profitable trades. You cannot do it any better than that.

On the valuation front, AKAM is trading slightly below its five-year average price-to-earnings (P/E) multiple of 34.79. As we type, the P/E is 29.58 for the trailing 12 months (TTM). During the same timeframe, the tech company average EPS growth of 6.45%. Analysts see the bottom line growing more than twice that rate in the next five years at 13.50%.  At its five-year average P/E, Akamai would trade at $74.80 using the 2014 consensus EPS estimate of $2.15.

We also see a slight discount on a price-to-sales basis. At this moment, the AMEX Internet Index member trades at 5.47 times sales. The norm in the last half-decade is 5.84. Based on next year's sales consensus estimate of $1.78 billion and the average P/S ratio, AKAM would price out at $58.08, which is 27.03% higher than Friday, December 13, 2013's close.

Overall: Akamai Technologies, Inc. (NASDAQ:AKAM) Leighton and Conrades history of profitable trades, plus modestly marked down P/S and P/E valuations, make AKAM an insider buy candidate worth consideration. 

My Bullish Case for Equities Heading Into 2014

By Matthew Pierce

Another month brought another new stock market high. In November, the bull market in US equities continued as the S&P 500 hit new three new all-time highs during the month and closed above 1800 for the first time on November 22.

It has been a great year for the US equity investor, and in this time of Thanksgiving and holiday celebration, all should rightfully celebrate. Wall Street's professionals should be happy with their year-end bonuses, and those investors who were willing to take big risks have been handsomely rewarded.

But I'm not sure that Main Street is paying attention.  Headlines reflect an undercurrent of worry about the economy, jobs, growth of income, government debt and bad fiscal management. Main Street is not listening to Wall Street talk about record corporate profits, earnings multiples that are not very expensive, modest inflation and improving economic trends.

Main Street is focused on jobs, corporate greed, and income disparity. Wall Street and Main Street are watching different channels. The trouble with this picture is that Main Street remembers the losses of 2008 too well, is still scarred by the Great Recession, and knows that good jobs have not magically appeared. Therefore, many on Main Street were not able or willing to participate in the great American equity rally.

But that may be changing, according to a Wall Street Journal article (“Stocks Regain Broad Appeal”, Nov 10, 2013). Individual investors are returning to equities.  Whether this is good or bad news for equities remains to be seen.

Many professionals believe that positive individual investor sentiment is a negative indicator for equity market growth. But other professionals take the view that the equity market is still relatively undervalued, even at this stage in a bull market.

So far, we have seen little to indicate that equities will not keep on trucking along. Main Street investors should have some of their savings in the global equity market, preferably in well-diversified risk-managed portfolios.

Global equities

Stock Indices	Nov 2013	Oct 2013	YTD 2013
Global, All Country (MSCI ACWI)	1.4%	4.0%	20.8%
US Large Cap (S&P 500)	3.1%	4.6%	29.1%
US Small Cap (Russell 2000)	4.0%	2.5%	36.1%
Non-US Developed (MSCI EAFE)	0.8%	3.4%	20.1%
Non-US Emerging (MSCI EMG)	-1.5%	4.9%	-1.2%
Gold Bullion	-5.4%	-0.2%	-24.7%
All returns through November 29, 2013

U.S. equity markets posted strong results in the 4th quarter to date with all major indices achieving measurable gains. Non-US developed markets also performed well, as European economic growth translated into stock market gains. Emerging markets lost ground in November after strong October and September returns.

Small cap stocks outperformed large cap stocks. Value and growth returned, although small cap growth performed slightly below small cap value. Gold bullion continued its year-long downward spiral losing more than 5% of value in November.

Domestic Fixed Income

Barclays Bond Indices	Nov 2013	Oct 2013	YTD 2013
US Aggregate	-0.4%	0.8%	-1.5%
US Treasury 7-10 yr	-0.9%	0.9%	-4.2%
US Treasury TIPS	-1.1%	0.6%	-7.2%
US Gov't / Credit	-0.3%	0.9%	-1.7%

 

10 Year Treasury Rates
Hot High Tech Stocks To Buy Right Now  Dec 31, 2012	1.78%
March 28, 2013	1.87%
June 28, 2013	2.52%
September 30, 2013	2.64%
November 29, 2013	2.75%
50 year average	6.66%
10 year average	3.52%

The US Bond market dropped marginally in November after rising somewhat in October. The 10-year Treasury interest rate edged upward to 2.8% at the end of November from 2.6% in October and September.

The continuing dominant driver of interest rate expectations remains the Fed's commitment to monetary stimulation through quantitative easing (“QE”), despite signs of an improving economy and a drop in joblessness in November to 7.0%.

Conditions are now sufficiently positive that the Fed could justify tapering QE at any of its next few meetings. Our suspicion is that there will be no change from current policy at least until Janet Yellen becomes chair of the Fed in January. Main Street concerns that tapering QE will halt the fragile jobs recovery will also likely keep the Fed from changing current policy in the very near term.

Summary

We remain positive on equity markets in general, and particularly relative to bonds, because of seasonal factors, improving economic news, record corporate profits and moderate earnings multiples.

But we also recognize that the US equity market is one exogenous shock away from a market correction and that at least one likely shock will occur when whispers of Fed tapering begin again, probably in early spring. That correction will cause Main Street great anxiety and give Wall Street another reason to buy on the dip. Until that occurs, we remain overweight equities. Keep on truckin'.

DISCLAIMER: The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.  Past performance is no guarantee of future results.

The post My bullish case for equities heading into 2014 appeared first on Smarter Investing

Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.

Matthew Pierce

Island Light Capital Corporation is an investment advisory and consulting firm that specializes in the development of optimally diversified investment…

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Markets Trading Ideas

Originally posted here...

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Charter Prepares Bear Hug for Time Warner Cable

Charter Communications Inc. (NASDAQ: CHTR) is reported to be preparing an offer to acquire larger competitor Time Warner Cable Inc. (NYSE: TWC) at a price below $135 a share. Time Warner has reportedly indicated that it would likely accept an offer north of $150 a share, so if Charter comes in with its low-ball (a bear hug) offer the primary reason is that it wants to get the ball rolling.

Time Warner, the country's second largest cable operator with some 11.4 million subscribers, has indicated its preference for a tie-up with Comcast Corp. (NASDAQ: CMCSA), the country's biggest cable company with 22 million subscribers. Whether such a pairing would pass antitrust review is highly dubious.

Time Warner lost 306,000 cable TV subscribers in the third quarter. Comcast lost nearly 130,000 and Charter had about 4.2 million residential cable subscribers at the end of the third quarter, a net loss of 143,000 in the past 12 months.Total cable subscriber numbers are down more than 350,000 compared with last year.

Time Warner is probably dreaming if it thinks it can command a price of $150 or more a share. It is losing customers for its pay cable service and though its residential and commercial Internet and phone businesses are growing, there is a lot of competition for those customers and Time Warner may not be able to make up the cable losses.

Still, the writing is on the wall. Cable subscriber numbers are down by nearly 10 million since reaching a peak of nearly 67 million in 2001 according to research firm SNL Kagan. Streaming video customer numbers are headed in the other direction, from 14.5 million in 2001 to 46.8 million in 2012, not far behind the 56.4 million total cable customers.

Charter was reported to have been talking with several banks about putting together a deal for the larger company and today's reports may be the beginning of a serious round of bidding for Time Warner. Other bidders might include Dish Network Corp. (NASDAQ: DISH), whose chairman Charlie Ergen has made no secret of his belief that the pay TV industry needs to consolidate but has so far been unable to strike a deal for wireless spectrum or a terrestrial based partner.

At $135 per share, Time Warner would be valued at about $67 billion (including debt), which is nearly 5 times Charter's market value of around $14 billion. Charter might also be angling for a deal that would include a swap with Comcast if Time Warner and Comcast make a deal and are forced by antitrust regulators to hive off some assets.

Time Warner's shares are trading up 0.3% at $131.48 in the late afternoon on Friday in a 52-week range of $84.57 to $139.85.

Charter stock is trading down less than 0.1% at $131.76 in a 52-week range of $68.44 to $144.02.

Rieder: Kinder, gentler, hard-hitting reporting

Journalists are not exactly perceived as heroes these days. Poll after poll finds the public is soured on them, ranking them down toward the bottom of the list with lawyers, congressmen, ax murderers and other lowlifes.

It's no wonder. For years, Hollywood has loved to portray reporters as a cynical lot who would do anything for a story.

And in real life, major mistakes (jumping to bogus conclusions on the D.C.-Navy Yard shooting and the Boston Massacre bombing, 60 Minutes' Benghazi fiasco) haven't helped. Nor has the propensity of some outlets to go overboard on online linkbait ranging from the silly to the inflammatory.

But a different, much more noble side of the profession was on display at a conference this week, one that reflects the romantic belief in their profession as a calling that often underlies the harder shell..

The event was called "Incivility in the Media: Engaging Journalists." It was put together by the National Institute for Civil Discourse, an organization created in the aftermath of the shooting of Rep. Gabrielle Giffords whose mission is pretty well summed up by its name; the Poynter Institute, a journalism education outfit; and the Newseum, the museum for news in Washington, D.C., that hosted the event. The conveners assembled a strikingly smart, diverse and passionate group of journalists from both legacy news outlets and new-media ventures, representing a broad swath of age groups, ethnic backgrounds, geographic bases and world views.

Incivility in American public life is a pretty big foe to tackle, and a collection of 40 or so journalists, no matter how perspicacious, is not likely to solve it in a few days. Even if the entire news media tightened up their games (don't bet heavily on that), much more would remain to be done, given the sheer amount of vitriol and paralyzing dysfunction that pervade our political life.

But you've got to start somewhere.

And make no mistake: today's civic ugliness is an opponent well worth taking on. Thi! s is, of course, hardly a new phenomenon. President Johnson was vilified by the anti-war movement. Liberals loved poking fun at Presidents Reagan and Bush II for being dumb.

And the right's visceral hatred of President Clinton (and Hillary) was off the charts, and kind of scary.

But in the past few years, it seems as if we have plummeted to a new low. The sense among those who loath him that President Obama is somehow an illegitimate president has triggered an astounding level of antipathy. Even public officials who should know better feel free to say outrageous things about him. Call it the "You lie" era.

Compounding all of this is the disappearing middle in both political parties. A friend of mine recently described her husband as the last surviving Rockefeller Republican. And just a handful of conservative or centrist Democrats remain in Congress.

The days when Reagan and Democratic House Speaker Tip O'Neill, or Sen. Ted Kennedy, a liberal warhorse, and Sen. Orrin Hatch, a conservative stalwart, could cut deals are as hard to remember as a world without Facebook and Miley Cyrus. Although this week's budget accord may be a sign we are tiptoeing back from the brink.

And the news media, or some of its key components, reflect this bitterly polarized world. The advent of right-wing talk radio, dueling partisan cable combatants Fox and MSNBC, digital aggregators and blogs that skew right and left, have combined to give us echo chambers where people who simply want to have their own views reinforced, with brio, can do just that.

Then throw in Twitter, which has revolutionized, as it has so many things, political reporting by dramatically ramping up the RPMs. Now the gaffe of the moment, the latest incendiary comment, goes viral in an instant, further poisoning the civic well.

So back to the journalists. No one at the conference brandished a silver bullet. But there were plenty of ideas that could help improve a fraught situation.

One of life's many ironies is! that a c! onclave of journalists, in a setting devoted to celebration of the First Amendment, was off the record. But the fact that the event happened, and the core values statement cobbled together by the participants, weren't. And that document is an inspirational reminder of why journalism matters.

The statement decreed that journalists, among other things, must:

• "Seek and report truth and information founded in facts, grounded in humanity and necessary to public function."

• "Hold the powerful accountable; challenge them to speak the truth and act with integrity; expose wrongdoing and injustice."

• "Create meaning; report facts in context with fairness, relevance and significance."

None of this is revolutionary, of course. Cynics will no doubt deem it a fantasy. And with the intense pressure in today's newsrooms to move at the speed of tweet, it's not an easy creed to live up to. But the document is an important statement of aspiration, and a valuable reminder that journalism is more than the morsel of the moment.

The sponsors see the gathering as a beginning, not the end. Adding political figures and ordinary citizens to the mix next time would make the conversation even richer..

And perhaps be a step, albeit a small one, toward a more civil society.

Baron Funds Comments on Bank Rakyat Indonesia

Bank Rakyat Indonesia (BKRKY) (Persero) Tbk PT, a leading commercial bank and microfinance lender in Indonesia, declined in the third quarter. Recent stock performance was largely attributable to a significant drop in the Indonesian Rupiah. While we believe the company's fundamentals and competitive position remain sound, the country suffered a larger than expected deterioration in its current account deficit, leading to a weaker currency and higher interest rates, which negatively impacted its local equity market. (Michael Kass)

From Ron Baron's Baron Funds third quarter 2013 report.
Also check out: Ron Baron Undervalued Stocks Ron Baron Top Growth Companies Ron Baron High Yield stocks, and Stocks that Ron Baron keeps buying

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Here's Why 2014 Will Be the Year of the Smartwatch

10 Best Casino Stocks To Own For 2014

AP/Gero Breloer The rise of wearable computing is an inevitable -- eventually -- but 2013 wasn't the breakthrough year for Web-tethered watches, glasses, and other personal gadgetry items that some had predicted it would be. Maybe things would have been different if Google's (GOOG) high-tech Google Glass specs had extended their reach beyond the first wave of beta testers. Or if Apple (AAPL) had delivered on the iWatch rumors. As it stands, the first wave of smartwatches on the market have generally failed to impress. But that's not fatal. There's always time to disrupt conventional thinking, and 2014 should be the year when it all comes together. Smartwatches Still Have a Lot to Learn Qualcomm (QCOM) became the latest player to enter the smartphone market when it began shipping the Toq this month. It offers integration with existing smartphones, a series of apps, and wireless charging. At $350, it's not cheap, but it promises a longer battery life than the handful of smartwatches already on the market. That's because of its proprietary reflective screen technology that doesn't rely on the power-slurping backlit LCD found on most smartwatches. It remains to be seen how well Toq will move this holiday season; it may not necessarily fare any better than Samsung's Galaxy Gear that rolled out a couple of months ago. The devices allow you to take phone calls, which the original and cheaper Pebble smartwatch did not do. But Samsung's first foray into smartwatches is currently limited in the variety of Samsung devices that it can play nicely with. Who Will Make the Smartwatch Ubiquitous? Pebble turned heads last year when it used a successful Kickstarter campaign to launch its $150 app-centric smartwatch, and these days, even Best Buy (BBY) is stocking the device. Qualcomm and Samsung are tech giants. Qualcomm is the wireless chip behemoth, and Samsung is the world's biggest seller of smartphones. If their arrival on smartphone bandwagon wasn't enough to mark 2013 as the year of wearable computing, why should we expect Apple to be the herald of that change? For the obvious, reason, of course: Apple the tech world's current heavyweight champ in innovation and disruption. The smartphone market was essentially a preserve of corporate types before Apple introduced the first iPhone in 2007. A few years later Apple introduced the iPad, while consumers were still wondering if they really needed a device that fell somewhere between an iPhone and a laptop. Spoiler alert: They did. And let's not forget iPods, or the iTunes store, which turned the music industry upside down. Apple's eventual arrival has a strong chance of transforming the wearable concept from a niche idea to mainstream ubiquity. You may not think you need a smartwatch -- now. But after the consumer tech tastemaker sways the early adopters to buy in, you'll start wondering why you should have to rifle through your purse or pockets the next time your phone rings or when you get an incoming text. Over time, the next generation will come to think of it as normal that you should be able to get score updates, Tweet alerts, or GPS directions by simply glancing at the screen on your wrist. Apple may not be able to do it alone, and there is already chatter that Microsoft (MSFT) will introduce a wearable computing device in 2014. Nor should we dismiss Amazon.com (AMZN). The leading online retailer didn't have a problem putting out its own tablet and e-reader. A set-top TV device reportedly got shelved ahead of a planned holiday release this season. And once Apple throws its weight into this niche, it would be a shock if Amazon doesn't react by sensing the opportunity to compete on price with its own gadget. We're going to go out on a limb and predict that its going to be a good year for smartwatches -- and potentially a great one. Get ready, 2014. You're on the clock.

Baxter: Bet on Bioscience

In most typical years, the stock market tends to rally in December, especially later in the month, after a bout of tax-loss selling has run its course, observes Vita Nelson in Direct Investment.

This late phenomenon is often a precursor to the 'January Effect,' when bargain hunters seek beaten-down stocks to ride higher in the new year.

But if we have learned anything in recent years, it may be that the typical year is not as common as it used to be. In 2013, for example, stocks sold off in August, only to rally in September and October, which are typically the weakest months of the year.

So, it would be wise to avoid the tendency to follow trends or seasonal expectations, and instead, focus on fundamentals (such as earnings and dividends) for the companies we own (or plan to own), and keep our sights on the long-term.

Top Value Companies To Invest In 2014

For example, our latest featured dividend reinvestment stock idea is Baxter International (BAX). Founded in 1931, Baxter International is a diversified medical products and services company.

Baxter operates two divisions: BioScience (44% of 2012 sales) produces blood collection and fractionation equipment, drugs, and vaccines, and Medical Products (56%) offers drug delivery systems, anesthesia products, and dialysis.

The company markets its products to hospitals, kidney dialysis centers, nursing homes, clinical and medical research laboratories, doctors' offices, and patients at home under physician supervision.

It had 2012 sales of $14 billion, manufactured its products in 27 countries, and sold them in more than 100.

Consensus estimates call for Baxter to earn about $4.66 per share this year and $5.05 in 2014, compared with $4.53 last year.

The number of shares outstanding has decreased from 650 million in 2006 to under 543 million today. The company has increased its dividend for seven straight years, to an annual rate of $1.96, providing a yield of 2.9%.

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Hyundai: 'A Crazy Black Friday Auto Deal' (And Other Quotes Of The Week)

If you live in the tri-state New York metro area, it was hard to miss the Black Friday radio commercials saturating the airwaves the last few days for one particular Hyundai dealership, in fact one of the largest in the area. The dealership, which shall remain nameless in this post, claims to have "the largest indoor Hyundai showroom in America."

These played especially frequently on the NYC radio sports channels, which makes sense, as they target males perhaps considering a new car purchase.

Now Hyundai is a fine brand which has shown significant improvement in recent years and touts "America's Best Warranty," so one had to be at least a bit intrigued by the sales pitch, which even captured my son's attention. This dealership is known for combining irreverent commentary on current events and celebrities with their spiel, so one also had to be at least a little amused by this particular campaign's premise:

Well, Black Friday is coming and they say the mall is going to be crazier than the Mayor of Toronto at a half-price crack sale. Oh yeah? Well this is America and nobody is going to outcrazy America, especially when it comes to shopping.

But it was the deal itself which really got our attention: "Dad, we can save $7500 on a brand new Hyundai, and, get this, if we get there early on Friday we'll also get a $1500 American Express gift card thrown in."

Now we happen to be in the car market, or at least considering a new car sometime in the next few months, so this sounded tempting. I have had my eye on the compact SUV Sante Fe Sport, which has won multiple awards and strong consumer ratings for its 2013 redesign, including "Crossover of the Year" by the editors of Autobytel. While there are numerous options which can be selected, let's assume for argument's sake a 2014 MSRP of around $25,000 for a base model.

So, net net, based on these radio spots I am believing I can walk away with a new 2014 car for an effective price of somewhere in the neighborhood of $16,000. Unbelievable deal, no, for a fairly decent quality small SUV? Well, yes, unbelievable is probably the operative phrase. When one listens more closely to the ad and then digs into the fine print, you will note several qualifying statements:

-Applicable to new vehicles only and subject to in-stock availability at the time of purchase. All rebates to dealer-Must qualify for $500 loyalty, $400 college grad, $1000 military and $1,500 HMFC rebate. Must finance through HMFC.–The $7500 check back or off of every new Hyundai in stock may result in paying more than the vehicle value. All offers and promotions are based on the DEALER POSTED PRICE™.

Top 5 Penny Companies To Watch For 2014

The noteworthy lines here are "may result in paying more than the vehicle value" and "offers based on the Dealer Posted Price." So, as with every contemplated new auto purchase, if it sounds too good to be true it probably is and it is imperative to do your own comparison research. While I am not saying you cannot get a terrific deal on a Hyundai from this and/or other area dealers, it just might not be exactly the one you are quite expecting based on a quick surface listen to the advertising. And that is being kind in my assessment, at least compared to some scathing blog posts, especially about the concept of the nebulous "Dealer Posted Price" provision and regarding similar advertised "deals" in the past.

Speaking of Black Friday advertising, it certainly felt overwhelming last week, as the "retail versus e-tail" war heated up to new levels of firepower. Most experts, however, maintain that the "arms race" of earlier and earlier Thanksgiving openings and deep discount doorbusters did little more than pull holiday sales up earlier in the sales cycle. The NRF is expecting a modest +3.9% increase in holiday retail sales this year, although their public statements have been bullish so far on the Black Friday weekend:

'By all appearances and according to CEOs I've spoken with across the retail spectrum, it looks like the early opening of stores on Thanksgiving and the traditional start of holiday shopping on Black Friday is breaking new records, including what companies are seeing through their digital channels,' said NRF President and CEO Matthew Shay.

And retailers and electronics companies appeared to have a fairly robust week for their stock prices, with the S&P retail ETF putting in a 1.1% gain in the shortened trading week. This far surpassed the moves on the Dow and the S&P 500, both up 0.1% on the week, although setting new all-time records yet again during their eighth straight up week. The Nasdaq, however, put in a sizable move of +1.7%, and finished with a weekly close Friday above the watershed 4,000 mark for the first time since 2000.

Given the short week, we will keep this equally short, hitting just a few more quotes of the week.

–"This does not have the characteristics, as far as I'm concerned, of a stock market bubble."  –former Fed Chair Alan Greenspan in an interview on Bloomberg Television's "Political Capital with Al Hunt." Greenspan went on to say that the U.S. economy is being held back by "lingering uncertainty," and that growth in 2014 should be around 2%, lower than many estimates. Greenspan, however, seemed to be saying that the market's rise is merely making up for a lost decade for stock prices and reverting to the mean of average 7% annual stock price increases.

–"We've got a long way to go in this turnaround." –HP CEO Meg Whitman on the company's prospects for 2014, after posting fourth quarter results Tuesday, which exceeded forecasts. Whitman was pleased with ending the calendar year on a strong note, but cautioned that "we are only in the second year of our five year plan." (CNBC)

–"It's kind of like Jimmy Carter all over again." — Clair Cortland Barnes, former Iranian hostage in 1979-80 and retired CIA, on the latest Iran nuclear deal. Barnes said of the agreement, "It's a win-win for them and it's a lose-lose for us." (CBS/AP)

– "I am incredibly excited to announce that Katie Couric is joining Yahoo as our Global Anchor."  –Yahoo's Marissa Mayer on Ms. Couric joining the company in a major news-shaping role, "leading a growing team of correspondents." (MarketWatch)

–"The bottom line — HealthCare.gov on December 1st is night and day from where it was on October 1st."  –chief White House troubleshooter Jeff Zients (MSN). According to press briefings, while acknowledging that significant issues remain and "there is more work to be done to continue to improve and enhance," (Forbes) the administration says the site can now "handle 50,000 people simultaneously and function smoothly 95 percent of the time." However, the administration was taking care to provide wiggle room earlier in the week, with other officials saying, "Our concern is that we want to make sure people have the right expectation going into this (the weekend's deadline efforts)."

–"The greatest ending in the history of sports." –The NY Post on the epic Auburn Tigers football victory over the Alabama Crimson Tide, where a fairly unprecedented last play 100-yard plus TD run back of a failed Alabama field goal attempt led to Auburn's wild win. It became even more incredible in the context of Alabama's undefeated number one ranking, and record of three national titles in the past four years. Auburn now moves on to the SEC title game and has ignited national title hopes of its own. It should be a post-season to remember.

 

Please follow me on Twitter, @djwizmo, read my other Forbes stories here, or click on "Follow" above to have posts sent instantly.

 

 

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American, US Air cleared to land merger

US Airways and American Airlines are now set to merge into the largest airline company on Dec. 9.

NEW YORK (CNNMoney) A federal bankruptcy court judge has cleared the way for American Airlines and US Airways to merge into the world's largest airline company, dismissing a final objection from a group of airline passengers trying to block the deal.

Judge Sean Lane approved an antitrust settlement reached earlier this month between the airlines and the Justice Department. Justice's earlier objections to the deal had been the major impediment to the merger.

But the department believes that concessions made as part of the settlement, including the transfer of some key airport slots to low-cost carriers such as JetBlue (JBLU, Fortune 500) and Southwest, (LUV, Fortune 500) will provide for increased competition

While the passenger group has indicated that it intends to pursue a private antitrust case against the merger, Lane ruled that should not stop American parent AMR (AAMRQ, Fortune 500) from emerging from bankruptcy and combining with US Airways. The passengers still believe the merger will result in higher fares and reduced choice.

The merger of the two companies is now set to take place Dec. 9, with the shares in the new combined American Airlines trading under the symbol AAL.

Passengers will still be booking flights under both the American Airlines and US Airways (LCC, Fortune 500) names for some time. Details about when the airlines will combine reservations and ticketing, frequent flier clubs and other operations are still being worked out, and those combinations are not likely until the beginning of 2014, at the earliest.

The formal combination of the companies' two separate operating certificates with the Federal Aviation Administration ! might not take place until 2015. But the combined company that will exist on Dec. 9 will be the largest airline in the world in terms of revenue, passengers carried and the number of miles flown by paying passengers, surpassing United Continental Holdings (UAL, Fortune 500), which was also formed by a merger.

Activist Investor Carl Icahn Still Wants His Bite Out Of Apple

Apple Inc. (NASDAQ: AAPL) was a company we just featured in two different ways. The first issue is that it is among six known tech stocks under activist investor pressure. The second is that Apple is about to hit new 52-week highs any moment. Along the activist front, Carl Icahn has issued a Tweet saying that he still plans to go after Apple.

Carl Icahn’s Twitter account said, “Gave $AAPL notice we'll be making a precatory proposal to call for vote to increase buyback program, although not at $150 billion level.”

Is that supposed to be a “predatory” proposal, or are we supposed to use a dictionary to see that precatory means a wish or advisory suggestion without a demand?

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So, with the stock at 52-week highs did the great activist investor realize that maybe piling on a ridiculous amount of debt just to buy back a boat load of shares was perhaps not the best strategy for Apple shareholders over a longer period than say a few months?

Understanding activist investors is sometimes very clear. Sometimes it is far from clear. If Apple has rallied this much off its lows in 2013, maybe the problems are far less than they seemed.

Apple shares were down 0.5% at $563.30 on last look. In short, Icahn is saying he is still there but will be a lot less loud without being quiet. Oh, and Carl Icahn will supposedly be on the cover for the next issue of Time Magazine.

Disgraced ex-Tyco CEO Kozlowski gets parole

Kozlowski amassed a fortune of nearly a half-billion dollars prior to his arrest.

NEW YORK (CNNMoney) The curtain is falling on the Dennis Kozlowski saga.

The New York State Parole Board granted release Tuesday to the former Tyco (TYC) chief executive, convicted back in 2005 for stealing hundreds of millions of dollars from the manufacturing conglomerate.

Kozlowski received a sentence of 8-1/3 to 25 years in prison in one of the highest-profile corporate fraud cases of the new millennium. He spent lavishly with the stolen funds, infamously dropping $6,000 alone on a shower curtain and $2 million on a "Roman orgy" party in Sardinia featuring an ice sculpture of Michelangelo's David urinating vodka.

Kozlowski started his sentence at a medium-security prison in upstate New York, where he was reportedly dubbed "Koz" by rapper and fellow inmate Ja Rule. He has since been on work release with an e-learning company, held at Manhattan's Lincoln Correctional Facility with the opportunity to leave on some evenings.

The minimum-security site is located just north of Central Park, and not far from Kozlowski's former $31 million apartment on Fifth Avenue.

Kozlowski is tentatively set to be released on January 17.

"Mr. Kozlowski is grateful to the parole board for its decision to grant him parole," his lawyer, Alan Lewis, said Tuesday.

Kozlowski's first parole bid was denied last year, prompting him to sue challenging the decision.

Hewlett-Packard Has to Outpace IBM and Accenture

Hewlett-Packard (NYSE: HPQ  ) will release its quarterly report on Tuesday, and investors have been increasingly nervous about the tech giant's ability to keep its long-term restructuring efforts moving forward. With rival IBM (NYSE: IBM  ) having faced tough conditions in the IT market and with Accenture (NYSE: ACN  ) squarely aimed at the same consulting customers that HP hopes to poach in its reorganization efforts, Hewlett-Packard faces pressure to start producing solid results from its strategic moves sooner rather than later.

The rise in Hewlett-Packard's shares has been particularly surprising because it indicates that Wall Street has been willing to give CEO Meg Whitman the benefit of the doubt in her long-range plans. Rather than punishing HP shares for the sluggishness of the company's rebound, investors have patiently waited for growth to emerge. But how much longer will they be willing to wait? Let's take an early look at what's been happening with Hewlett-Packard over the past quarter and what we're likely to see in its report.

Stats on Hewlett-Packard

Analyst EPS Estimate	$1.00
Change From Year-Ago EPS	(13.8%)
Revenue Estimate	$27.91 billion
Change From Year-Ago Revenue	(6.8%)
Earnings Beats in Past 4 Quarters	3

Source: Yahoo! Finance.

What's in store for Hewlett-Packard earnings this quarter?
In recent months, analysts have stayed largely stable in their calls on Hewlett-Packard earnings, cutting current-year estimates by a penny per share but boosting next year's earnings projections by the same amount. The stock has moved up 14% since late August.

The rebound came after troubling results for Hewlett-Packard in its July quarter, with the company seeing its shares drop 12.5% after HP issued its report. Earnings met expectations, but even a small revenue miss was enough to spook investors about the pace of the turnaround. Whitman's assurances that the company's recovery remains on track didn't make shareholders any happier about the 8% drop in year-over-year revenue that HP suffered, even though the CEO has been smart in keeping HP from resorting to price cuts to drive sales.

Still, the entire industry continues to face struggles. IBM reported a substantial drop in revenue of its own, with hardware sales particularly weighing on the tech giant's results. Services and software sales were up slightly, though, validating the approach that both IBM and HP have taken in moving away from their respective hardware-based strengths over the years. Yet IBM arguably has even greater prospects for future success, given its emphasis on the highly popular data-analytics area and its better-developed presence in the IT consulting realm. Accenture has also seen difficulty in its consulting businesses, with only modest gains in overall revenue failing to meet investors' expectations.

HP keeps trying to make inroads in certain niches. Its deal with Cerner in late August gives HP an entry into the big-data business of hospitals and health care, helping it go up against Accenture and IBM in a high-growth area. Yet Accenture recently boosted its own exposure to health-care IT by buying out ASM Research, and IBM has a long history of health-related technology with its Watson artificial-intelligence medical assistant.

One interesting move involves HP's decision to get involved in 3-D printing. The company said that it will enter the space as early as next year, making HP a huge fish in the heretofore small pond of relatively tiny upstart players in the 3-D printing industry. Given HP's expertise in printing, the move makes intuitive sense, but it's unclear whether HP can actually make big profits from 3-D printing or rather will simply accelerate the process of the industry becoming a commodity business like its other hardware efforts before it.

In the HP earnings report, watch to see whether the company stays on track with its overall reorganization plans. Investors have been patient until now, but they might not stay so if the tech giant doesn't start delivering on its promises soon.

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Best Buy Still Has a Long Way to Go

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Alamy Not so fast, Best Buy (BBY). Shares of the leading consumer electronics retailer initially slipped after posting quarterly results on Tuesday morning. The report doesn't seem so bad at first. Revenue was flat at $9.36 billion, in line with analyst estimates. Adjusted earnings more than quadrupled to 18 cents a share, blowing past Wall Street expectations of an adjusted profit of 11 cents a share. However, the stock had soared 268 percent this year ahead of Tuesday's report. When you go through that kind of rally, expectations are naturally heightened. You need to blow away the market to keep those gains. Still, Best Buy hasn't proven that it can be a big winner this holiday shopping season. Comps and Circumstance A bright spot in Best Buy's report is that same-store sales rose 1.7 percent for its domestic locations. But dig a little deeper and the numbers stop sounding quite so impressive. For starters, Best Buy is one of the growing number of retailers that include their website sales when calculating comps. They simply take online sales -- and at Best Buy we're talking about an additional $68 million relative to last year -- and divide them over the number of established stores. In short, Best Buy stores weren't that much busier during their fiscal third quarter. BestBuy.com sales accounted for nearly half of the "same-store sales" improvement. Same-store sales would still have been positive without the online boost -- and positive comps at the once struggling consumer electronics giant is newsworthy -- but that's only because same-store sales slipped 4 percent during the prior year's third quarter. In other words, the typical Best Buy store is still ringing up fewer sales than it did two years ago, when the stock was still much lower than it is today. Oh, and that $0.18 a share adjust profit that seems so great now pales in comparison to the $0.47 a share that it earned during the same quarter in fiscal 2011. Best Buy still has a long way to go, and it won't be easy to get there. The Electric Slide CEO Hubert Joly stepped into a horrendous situation last year. The previous CEO had just been let go after carrying on an inappropriate relationship with a co-worker, and shoppers were mostly just using Best Buy as a showroom to kick the tires of products before they bought them elsewhere for less. Best Buy has tackled the showrooming problem by lowering prices, shaving its overhead and passing on a good chunk of those savings to its customers. However, even the $505 million in annualized savings that Best Buy has realized so far is unlikely to allow it to compete with Amazon.com (AMZN) and other online retailers that don't need to staff and maintain a local presence in every market they want to serve. Analysts have come to embrace Best Buy. Just 4 percent of Wall Street pros had a "buy" or "outperform" rating on the stock a year ago, according to FactSet, a financial data firm. The bullish ranks now include 58 percent of analysts. Best Buy shouldn't have a problem drumming up sales over the holidays. The Xbox One and PS4 will be in demand, and there isn't any kind of material discounting for them in cyberspace. If anything, those video game consoles will only get more expensive online as speculators take advantage of tight supply. The problem here is that Best Buy's unlikely to sell a lot of the high-margin products that prop up profitability. No one's buying physical media anymore, and forcing itself to match competitor prices will keep the markups honest elsewhere. Best Buy is just getting started in the turnaround process, but it's going to take a long time before it's truly back to the retailing giant that it used to be.